Fred on economics

[Pointedstick]

I usually excerpt bits… but really, just read the whole thing.

http://www.fredoneverything.net/Fredbraith.shtml

[I Shrugged]

There is a lot of truth there.  Deep down, I wonder if we aren't headed for a new Dark Ages at some point.

[Pointedstick]

I hope it's not a dark age, because I don't see any inherent reason why that's how it should play out. The end of work should be a wonderful, magical thing that unlocks the potential of some, and at least allows the rest to be happy all day. As Fred points out, real work is mostly boring, unpleasant, physically demanding, etc.

It really seems like we're moving in the direction of a post-work society where machines are able to do nearly all of the unpleasant labor. The open question is how we transition out of a "purchasing power from prior production" model in which an increasing fraction of people have no purchasing power because they have no productive capacity due to automation. The current solution seems to be welfare, but it's an awkward and clunky solution that has a lot of perverse incentives. Mass incarceration and mass higher education are more examples of things that really don't fit very well but have arisen because of their social utility of diminishing the labor force and giving lots of people something to do all day.

[MachineGhost]

Citizen's Dividend me for!!!

[Greg]

Excellent article. I for one welcome our ant overlords. That and I agree having a citizen's dividend would be very appealing to have and post-work will eventually work itself out, slowly. Until then, we just have to make sure to have the intellect, connections, and being in the correct job to have it not be displaced by:

1.) people doing the same job for less money in another location,
2.) being replaced by a robot.

[Pointedstick]

What will the people who can't sit on their asses all day watching TV and eating unhealthy snacks do? If I have more than 3 or 4 days in a row off, I get sooo bored once I am done with the fix-it projects, caught up on my reading, and there are no new posts on this forum. Even if you like playing golf [I don't], how many days a week can you do that? And it gets really expensive after a while. A workout / bike ride / etc. only absorbs an hour or so.

I'm the same way. People like you and I (and other "cognitive elite"-types who hang out in places like this forum) actually enjoy "providing marginal improvements to the wondrous system we already have", as TennPaGa to beautifully put it. We're never going to be bored, and our productivity ensures that we're not going to be the kind of people that debates are had over how to allocate us purchasing power. We will allocate it to ourselves by figuring out how purchasing power is allocated and plugging into that system. The proportion of people on this forum who have or had high-paying jobs, and/or who are pursuing early retirement or have already achieved it is astonishingly high. We are the 2% referenced in the article.

[Mountaineer]

What will the people who can't sit on their asses all day watching TV and eating unhealthy snacks do? If I have more than 3 or 4 days in a row off, I get sooo bored once I am done with the fix-it projects, caught up on my reading, and there are no new posts on this forum. Even if you like playing golf [I don't], how many days a week can you do that? And it gets really expensive after a while. A workout / bike ride / etc. only absorbs an hour or so.

I'm the same way. People like you and I (and other "cognitive elite"-types who hang out in places like this forum) actually enjoy "providing marginal improvements to the wondrous system we already have", as TennPaGa to beautifully put it. We're never going to be bored, and our productivity ensures that we're not going to be the kind of people that debates are had over how to allocate us purchasing power. We will allocate it to ourselves by figuring out how purchasing power is allocated and plugging into that system. The proportion of people on this forum who have or had high-paying jobs, and/or who are pursuing early retirement or have already achieved it is astonishingly high. We are the 2% referenced in the article.

Crap!  All this time I thought I was in the 1%.  Now I don't have to feel that I'm being personally slammed and relegated to the sidelines of importancy that Dear Leader tried to put me in.  Crap!  Back to my bon-bons and hot tub shamelessly stolen from the ranks of the 98%, or is it 99%?  Double crap!  There's Nancy P. sipping a glass of the finest Napa wine beside me.  Tripple crap!  There is clueless Harry R. counting his chips.  Lord have mercy.

... Mountaineer

[Tortoise]

I think automation is slowly bringing us toward a philosophical showdown: Either we figure out what distinguishes human beings from even the most advanced robots/computers imaginable and use that distinction to restructure society, or else we potentially perish as society crumbles due to humans becoming "obsolete" or "superfluous."

Necessity is the mother of invention.

[Lowe]

What will the people who can't sit on their asses all day watching TV and eating unhealthy snacks do? If I have more than 3 or 4 days in a row off, I get sooo bored once I am done with the fix-it projects, caught up on my reading, and there are no new posts on this forum. Even if you like playing golf [I don't], how many days a week can you do that? And it gets really expensive after a while. A workout / bike ride / etc. only absorbs an hour or so.

I do not like working jobs.  I wish I could sit at home and work on my own projects, without having to take the unbelievable risk of starting a company.  I may eventually try starting one anyway, but just saying, I prefer solving puzzles I chose myself.  I could easily spend my whole life doing that.

If everyone like me were free to do that, and not just the few who have inherited wealth, human beings would be a lot better off.  There would be way more open source software, music, and books, at minimum.  That is not the way the economy works presently, though.

[madbean]

The transition to a work-free society will not be without pitfalls.....

[moda0306]

The transition to a work-free society will not be without pitfalls.....

Woah.  Did they test this thing for self-awareness?

Skynet 1.0

[MachineGhost]

What will the people who can't sit on their asses all day watching TV and eating unhealthy snacks do? If I have more than 3 or 4 days in a row off, I get sooo bored once I am done with the fix-it projects, caught up on my reading, and there are no new posts on this forum. Even if you like playing golf [I don't], how many days a week can you do that? And it gets really expensive after a while. A workout / bike ride / etc. only absorbs an hour or so.

I think we're seeing a small taste of what is to come with the Kardashian Klan.  But at least they are productive in the sense they are businesswomen and marketers to the consuming chattering classes.

But a Citizen's Dividend will eliminate RIF/poverty/drug violence and turn virtually everyone into Edison Jr's.  There will alwyays be a small minority that are self-destructive hedonists in their brief bright flame of life, but you're free to start or support a treatment and rescue center for them, if you so care.

[dragoncar]

The transition to a work-free society will not be without pitfalls.....

Woah.  Did they test this thing for self-awareness?

Skynet 1.0

The tortoise lays on its back, its belly baking in the hot sun, beating its legs trying to turn itself over. But it can't. Not with out your help. But you're not helping.

[Pointedstick]

If you think about it, we already have a sort of primordial form of citizen's dividend for people who are old, poor, or canny/amoral enough to scam the system, which I hear is pretty easy, especially for SS disability. I think the trend toward ever greater welfare systems and payments is going to eventually have to morph into a citizen's dividend. The libertarians lost; welfare is the future... hopefully in a more universal, less judgmental, moralizing, poverty-trapping, perverse-incentive-causing fashion.

And heck, Alaska already has the real deal. It's not a ton of money, the amount is unpredictably variable, and it's not distributed very intelligently (as a yearly tax refund vs a monthly check) but hey, it does exist.

https://en.wikipedia.org/wiki/Alaska_Permanent_Fund

It's also easier than ever for the very bright to create their own citizen's dividend: it's called early retirement extreme, usually in conjunction with being a doctor, lawyer, engineer, accountant, architect, etc.

[I Shrugged]

Don't forget entrepreneur.

[I Shrugged]

.... I think the trend toward ever greater welfare systems and payments is going to eventually have to morph into a citizen's dividend. The libertarians lost; welfare is the future... hopefully in a more universal, less judgmental, moralizing, poverty-trapping, perverse-incentive-causing fashion.

....

Are you suggesting that as utopian, or dystopian?  Sounds more like the latter to me.  And, I cannot see it working any differently than Marxism has/does.

[MachineGhost]

Are you suggesting that as utopian, or dystopian?  Sounds more like the latter to me.  And, I cannot see it working any differently than Marxism has/does.

I would think it is about as utopian as anarcho-capitalism would be, so hardly dystopian.  Forcing people to work unproductive make-work jobs under Communism is a little different than allowing people the liberty to work a productive job if they so choose.  And productive will probably be limited to the Imagination Era with robots doing all the manual labor.

The government doesn't need to borrow, it can just create money.  Likewise, people do not need to work when robots can do their jobs faster, better, cheaper.

They key here is not to become attached to any kind of economic ideology or you'll lack flexibility in adjusting to post-scarcity.

[Pointedstick]

I think automation is slowly bringing us toward a philosophical showdown: Either we figure out what distinguishes human beings from even the most advanced robots/computers imaginable and use that distinction to restructure society, or else we potentially perish as society crumbles due to humans becoming "obsolete" or "superfluous."

I've been reflecting a lot on this, and I think Tortoise has hit the nail on the head. Our current capitalist system defines one's value by one's accumulation of money, and by extension, one's productivity, productivity being how one gets money. But production inherently puts us in conflict with machines as they constantly advance and improve in productive capacity.

It's a needlessly antagonistic system when the obvious improvement is to let machines so as much of the work as possible and leave humans to do what they want, whether that be consumption of machine-produced goods, production of goods machines can't produce or are still inferior to those produced by humans, the pursuit of spiritual enlightenment, taking on personal projects, or whatever.

But this will obviously require inventing a new social system that divorces human worth from personal productive capacity.

[MachineGhost]

But this will obviously require inventing a new social system that divorces human worth from personal productive capacity.

IMO, it's not that hard given how they're all piggish and obese from being food hedonists already.  WALL-E here we come!!!

[Pointedstick]

But this will obviously require inventing a new social system that divorces human worth from personal productive capacity.

IMO, it's not that hard given how they're all piggish and obese from being food hedonists already.  WALL-E here we come!!!

I suppose you're right that society evolves all on its own, independent of what the laws or conventions say. That's the origin of my contention that we're already sort of moving toward a citizen's dividend. Universal transfer payments to subsidize hedonism, baby. It's the future. Heck, it's practically the present.

Has anyone noticed the precipitous decline in crime in the last 30 years? And most of what remains is localized to a small number of problem neighborhoods inhabited by problem people who are mostly in the drug trade or trapped in gang culture, or both. I wonder how many more people were kept out of these shady businesses by the simple expedient of monthly cash payments. Sure it's trashy, but if you have enough money to live a meager and shabby life, you don't need to sell dope or rob houses.

It is always fascinating to see the disconnects between popular perceptions and reality. Here I think we're seeing that 1) we have a big underclass and 2) we can basically pacify and ignore them by simply paying them a little bit of money each month and keeping them on the path of hedonism, which is too pleasurable and distracting to make crime worth it. Nothing more than good old fashioned bread and circuses, I suppose.

[MachineGhost]

It is always fascinating to see the disconnects between popular perceptions and reality. Here I think we're seeing that 1) we have a big underclass and 2) we can basically pacify and ignore them by simply paying them a little bit of money each month and keeping them on the path of hedonism, which is too pleasurable and distracting to make crime worth it. Nothing more than good old fashioned bread and circuses, I suppose.

I was thinking about how you think we represent the top 2% on this here forum.  You might be correct as far as intellectual prowness goes (I doubt the PP is attractive only to the very wealthy).  But the problem is we don't have any dominant political power.  Another big problem is the transition to post-scarcity can't happen politically under the current ideologies until automata really does take over everything and precipitates an unemployment crisis.

Here's another small taste of what the future will be like:

http://www.bloomberg.com/bw/articles/20 ... high-rises

[Kriegsspiel]

My hypothesis is that the biotechnological and robotic advances will lead to a global basic living stipend of some kind. Robots and automation would be making the necessities of life: lab-grown meat, aquaponic vegetables, gadgets made by robots or 3D printers, whatever. Robots may entertain us too, but I think humans would too obviously. Money would still be important, since people would still want to buy property/rent apartments in desirable locations. So there would still be a profit motive somewhere. This would probably disappear the closer we get towards living mostly in a virtual world, and maybe a person's reputation/social capital would become more important (like in Accelerando).

I think in the near-term future, someone will figure out how to scrub the carbon emissions from the atmosphere (like by using plankton) so that we can keep using fossil fuels. Robots would probably begin harvesting the minerals in the asteroid belt, engineered-bacteria may be hard at work exhaling chemicals, and energy will probably come from a combination of renewables and fossil fuels at first. I think that a lot of the world's problems are caused by people being hungry and poor. Once people aren't hungry or poor anymore, they'll mostly fuck around. Some will naturally be productive. If there are no more useless jobs, the main problems left to solve would be improving renewable energy sources until we arrive at a full Dyson Sphere/Matrioshka Shell.

At that point, we'd be living in some kind of Singularity/Accelerando type existence.

The only sort of Dark Age style repression that may be possible is something like what Ran Prieur mused about: the rich living in private compounds defended by drone armies, while the rest of humanity lived in relative comfort outside the walls. Relative comfort for all would be so firmly within our grasp that there would be no reason to let the seething mass rebel. Maybe something like a nicer version of Elysium?

[stone]

I think the crucial point about a citizens' dividend is that it is NOT means tested. It pays out to everyone regardless. Currently in the UK we have an OK safety net for the unemployed BUT they are in effect forced not to improvise employment because anything they do earn gets deducted from the means tested benefits. It creates economic exclusion with all the grimness that entails.

I like this article about citizens' dividend; http://www.interfluidity.com/v2/5066.html

But we do have other options. If it is true, as Summers seems to think, that humans prefer to do important things even when they are not forced by a labor-market cudgel, and if it is also true that financial constraint causes people to accept safe and sure work rather than take chances on activities that might be speculative but more valuable, then there might be social return in having the state absorb some of the risk of failure faced by individual humans. In effect, the state could provide venture capital to the people. If ordinary citizens had a small but reliable annuity, too modest to live comfortably but enough to prevent destitution, then at the margin, we’d expect people who currently seek or accept unfulfilling, underpaid work to opt for entrepreneurship, or education, or art, or child-rearing, or just hold out for a better gig. “VC for the people”? would combine a reduction in labor supply with a lot of new labor demand, forcing employers to increase wages and encouraging substitution of capital for the least desirable jobs. Both the wage effect and the annuity itself would increase the share of national income available to those without direct claims on capital, reducing inequality. In his talk, Summers mused (wonderfully) that he’d prefer we not evolve to an economy in which people are employed providing increasingly marginal services to the rich, working as specialized “knee masseurs”? and the like. A straightforward way to preclude that is to ensure that everyone has the means to refuse those jobs and take chances on more meaningful and ultimately more valuable work.

“VC for the people”? would reduce market discipline, but it would certainly not eliminate it. People do not require the threat of destitution to cultivate ambition. It is much better to supplement ones modest annuity with a vigorous market income than to crouch inertly in a hovel. Most people (like most of you, my not-nearly-destitute readers) will still try hard to achieve economic success. It’s just that people who have options are much more likely to actually find success than people who don’t.

“VC for the people”? has a more common name. It is called a universal basic income. Properly implemented, it is not means-tested and carries no disincentive to earn. It is inflationary via increased purchasing power of ordinary people, the best kind of inflation, especially desirable in disinflationary times. Its level is a policy instrument and need not be indexed to prices. If it “works too well”?, positive interest rates can tamp down spending, and, presto, no more secular stagnation.

I also had a go posting about how we might best adapt to an automated world:
https://directeconomicdemocracy.wordpre ... also-rich/

There is much hand wringing about jobs being replaced by robots. I actually see it as having the potential to provide enormous benefit. Everyone can see that for the owners of all of the robots, it is great. The owners get to have the benefit of all the work the robots do. I’m also most struck by the fact that there is now no physical reason why everyone couldn’t be in that position. This post is about how automation has the potential to turn “class conflict”? on its head by ensuring that no-one need be outside the “owning class”?.

I think we need to think about what is the constraint on how “rich”? everyone can be.  In previous times, much of the constraint was how much labour everyone could employ. Not everyone could be a mill owner or plantation owner.  It was labour that was limiting.  Each mill owner needed thousands of mill workers. Each plantation owner needed thousands of cotton pickers. But the owning class ALL were rich -however clever or stupid or inept they were. In the near future won’t the robots be the equivalent of the mill workers and the cotton pickers? Won’t other robots be the equivalent of the people who in the 1800s designed the machines and directed the slaves? The only role for people will be that of the owning class –free to do whatever they fancy. In many cases that freedom would probably be put to use in developing even more advanced technology.

Of course we COULD choose to have just a few in the owning class and have everyone else rioting. BUT the owning class would get no benefit at all by keeping itself select. In fact that would make each member of the owning class less rich because the market would be smaller.  Technological innovations have very high development costs relative to the unit cost of the product. A product such as a new medicine or an innovative electronic gadget becomes dramatically cheaper to produce per unit item if the development costs are spread across many more units sold. Imagine if we lived in a world with greater disparities of wealth than we do now. Imagine if the market for the latest medicine or electronic gadget was 1/10000th the current size. Those few who could still afford such items would have to pay massively more to cover the development costs. That dynamic works in the opposite direction too. Imagine if the potential market for the latest product was all seven billion people on earth. Then development costs would be spread so thinly they would hardly be noticed. Capital goods such as the robotic workers themselves also have the same economy of scale. It starts to make financial sense if many factories staffed with robots are to be built but not if just a few.

Clearly having an economy directed towards technological development is critically dependent on having lots of potential customers. When development costs are high relative to on-going production costs, then a large market is a great benefit and when they aren’t, it isn’t. The direction of the economy thus steers towards innovation when everyone can afford the latest technology and away from it when they can’t. There is no sense in having a fancy robot factory if it is just going to be idle due to lack of customers......

[Pointedstick]

Stone, I've found that I've warmed up to the perspective expressed on your blog in the last year or so as I've started to think more and more about the future of our economic system.

Among the many articles you linked to in that post, here's a footnote of all things that I found particularly thought-provoking:

http://www.interfluidity.com/v2/3487.html

[1] It is interesting that even in very unequal, high productivity societies, one rarely sees the very poor reverting to low-tech, low productivity craft production of goods the wealthy can manufacture efficiently. One way or another, the poor in these societies get the basic goods they need to survive, and they mostly don’t do it by spinning their own yarn or employing one another to sew shirts. One might imagine that once people have no money or claims to offer, they’d be as cut off from manufactures as subsistence farmers in a low productivity society. But that isn’t so. Perhaps this is simply a matter of charity: rich people are human and manufactured goods are cheap and useful gifts. Perhaps it is just entropy: in a society that mass produces goods, it would take a lot of work to prevent some degree of diffusion to the poor.

However, another way to think about it is that the poor collectively sell insurance against riot and revolution, which the rich are happy to pay for with modest quantities of efficiently produced goods. “Social insurance”? is usually thought of as a safety net that protects the poor from risk. But in very polarized societies, transfer programs provide an insurance benefit to the rich, by ensuring poorer people’s dependence on production processes that only the rich know how to manage. This diminishes the probability the poor will agitate for change, via politics or other means. Inequality may be more stable in technologically advanced countries, where inexpensive goods substitute for the human capital that every third-world slum dweller acquires, the capacity and confidence to improvise and get by with next to nothing.

Every businessperson who operates in poor areas knows that a certain amount of theft is simply a "cost of doing business" in those places; perhaps this is an example of that. And of course there's also transfer payments, which can definitely be seen as the government paying for "unrest insurance," which would make politicians look bad and get kicked out of office.

[stone]

Pointed Stick, I found that whole interfluidity post about "Trade-offs between inequality, productivity, and employment" a revelation. The world seemed to make more sense after reading it.